Our mission is to provide the highest quality fruit and vegetable related juices and products to retail and food service customers.

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2 To be known as leader of quality products in the region. Dedication to quality is a way of life at our Company, so much so that it goes far beyond rhetorical slogans. It is the objective of Shezan International Limited to produce and provide products and services of the highest quality. In its activities the Company will pursue goals aimed at the achievement of quality excellence and succeed as a profitable business. These results will be derived from the dedicated efforts of each employee in conjunction with supportive participation from management at all levels of the Company. To play its role in the economic development of the country and to enhance quality of life of its people. Our mission is to provide the highest quality fruit and vegetable related juices and products to retail and food service customers. We want to be the recognized industry leader in quality and service, providing more than expected for our customers, employees and stakeholders. We will accomplish this by maintaining a tradition of pride in our products, growth through innovation, integrity in the management of our business, commitment to Team Management and the Quality Improvement Process.

3 Annual Report 2013 Contents 02 Company Information 04 Notice of Meeting 05 Directors Report to the Members 10 Horizontal Analysis 11 Vertical Analysis 12 Statement of Value Addition 13 Pattern of Shareholdings 16 Six Years Review at a Glance 17 Review Report to the Members 18 Statement of Compliance 19 Auditors Report to the Members 20 Balance Sheet 21 Profit and Loss Account 22 Cash Flow Statement 23 Statement of Changes in Equity 24 Notes to the Financial Statements 51 Proxy Form 1

4 Company Information Board of Directors: Mr. Muneer Nawaz Mr. Muhammad Khalid Mr. Mahmood Nawaz Mrs. Amtul Hai Khalid Mr. M. Naeem Ms. Nazish Khalid Mr. Syed Munawar Hussain Rizvi Mr. Saleem Zamindar Chairman Chief Executive (N.I.T. Nominee) (N.I.T. Nominee) Chief Financial Officer & Company Secretary: Mr. Faisal Ahmad Nisar, FCA Audit Committee: Mr. Muneer Nawaz Mr. M. Naeem Ms. Nazish Khalid Chairman Member Member Human Resources and Remuneration Committee: Mr. Muneer Nawaz Chairman Mr. M. Naeem Member Mr. Saleem Zamindar Member Registered Office / Head Office: 56 - Bund Road, Lahore Phones: (042) Faxes: (042) & shezan@brain.net.pk Factories: 56 - Bund Road, Lahore Phones: (042) Faxes: (042) & shezan@brain.net.pk Plot No. L-9, Block No. 22, Federal B, Industrial Area, Karachi Phones: (021) Fax: (021) shezan@cyber.net.pk Plot No , Phase III, Hattar Industrial Estate, Hattar. Phones: (0995) & Fax: (0995) sil-htr@shezan.com Auditors: Ernst & Young Ford Rhodes Sidat Hyder, Chartered Accountants, Mall View Building, 4 - Bank Square, Lahore. Share Registrar: Corp Link (Private) Limited, Wings Arcade, 1-K, Commercial, Model Town, Lahore. Legal Advisors: Cornelius, Lane & Mufti, Nawa-e-Waqt Building, Shahrah-e-Fatima Jinnah, Lahore. Bankers: United Bank Limited. MCB Bank Limited. National Bank of Pakistan. The Bank of Khyber. Bank Al-Habib. Habib Bank Limited. Bank Alfalah Limited. 2

5 Annual Report

6 Notice of Meeting The 50 th Annual General Meeting of the Company will be held on 29 October 2013 at am at Avari Hotel, 87-Shahrah-e-Quaide-Azam, Lahore, to transact the following business: - Ordinary Business: 1. To confirm the minutes of Annual General Meeting held on 30 October To receive and adopt the Audited Financial Statements of the Company together with the Directors and Auditors Report thereon. 3. To consider and, if thought fit, approve the cash Rs. 10/- per share, i.e., 100 % and bonus 10% i.e. one ordinary share for every ten shares held by the existing shareholders, as recommended by the Board of Directors. 4. To appoint External Auditors of the Company for the year and to fix their remuneration. 5. To transact any other business with the permission of the Chair. Special Business: 6. To give effect to the issue of bonus shares, as recommended by the Board of Directors, consider and, if thought fit, pass, with or without modification, the following resolution as an ordinary resolution: Resolved that a sum of Rs. 6,600,000/- be capitalized out of the free reserves of the Company and applied towards issue of 660,000 ordinary shares of Rs. 10/- each as fully paid bonus shares, ranking pari passu with the existing shares, in the proportion of one (01) ordinary share for every ten (10) ordinary shares held by the members whose names appear in the Members Register at the close of the business on 21 October Further resolved that the Chief Executive and/or Company Secretary be and is/are hereby authorized to give effect to the resolution and to do and cause to be done all acts, deeds and things that may be necessary or required for issue and distribution of the said bonus shares. A statement under section 160(1)(b) of the Companies Ordinance, 1984 pertaining to the Special Business referred to above, is given in this Notice of Meeting. By Order of the Board Notes: 1. The share transfer books of the Company will be closed from 22 October 2013 to 29 October 2013 (both days inclusive), for determining the entitlement of dividend. 2. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote on his/her behalf. Form of proxies, in order to be valid, must be received at the Registered Office of the Company not less than 48 hours before the meeting. 3. No person shall act as proxy unless he/she is a member of the Company, except that a corporation may appoint a person who is not a Member. 4. Signature of the shareholder on proxy application form must agree with the specimen signature registered with the Company. For the convenience of the shareholders, a proxy application form is attached with this report. 5. Shareholders are requested to immediately notify the Company of any change in their address to our registrar, M/s. Corp Link (Private) Limited, Wings Arcade, 1-K, Commercial, Model Town, Lahore. 6. Any individual beneficial owner of the shares in the Central Depository Company (CDC), entitled to vote at this meeting must bring his/her Computerised National Identity Card with him/her to prove his/her identity together with his/her account number in CDC and in case of proxy, must enclose an attested copy of his/her Computerised National Identity Card. Representative of corporate members should bring the usual documents required for such purpose. STATEMENT UNDER SECTION 160(1)(b) OF THE COMPANIES ORDINANCE, 1984 Item No. 6 of the Agenda The Board of Directors are of the view that the Company s financial position and its reserves as on 30 June 2013 justify the capitalization of reserves by way of issue of bonus shares to the members in the ratio of one (01) Bonus Share for every ten (10) Ordinary Shares held. As a result of issuance of Bonus Shares, the paid up capital of the Company shall stands increased to Rs. 72,600,000/-. The Directors of the Company have no other interest, except to the extent of their shareholding, in this business either directly or indirectly. Lahore: Faisal Ahmad Nisar 25 September Company Secretary 4

7 Directors Report to the Members Annual Report 2013 The Board of Directors take pleasure in presenting the annual report and audited financial statements of the Company for the year ended 30 June Economic and Business Review The economy continued to be affected by structural problems, including a domestic energy crisis, a precipitous decline in investment, persistently high inflation and security issues. Budget deficits remain high, driven by substantial subsidies and losses at state-owned enterprises. Power is the main constraint for economic growth. Our economy is highly vulnerable mainly due to low growth rate, deteriorating security situation, low savings rate, weak tax structure, large debt re-payment, low investment in human capital and poor governance. Energy shortages intensified during the year, seriously pinching manufacturing sector in the Punjab. Irregular load shedding for a long duration is estimated to come to at least 2 percentage points of GDP growth annually. The Company s business strategy focuses mainly on reinforcing and establishing presence in the markets in which it operates and expanding its share in potentially high growth market segments. It also includes continued growth based on the Company s existing product range and its ability to launch new products. The energy crisis is playing havoc especially in the Punjab. We continuously have to rely on furnace oil in the absence of sui gas and diesel to run our generators when there is no electricity. There seems to be no respite on this front in the near future, all indications are that the energy situation would worsen in the months ahead and add to one cost of production. However, inspite of a volatile trend in the market, we are pleased that our juice products are showing encouraging sales trends. During the period we have also achieved encouraging growth in export sales of our products. Our production facility in Karachi continued to meet the export requirements in the Middle East, Africa, USA and Europe and performed well during the year. We are optimistic that our products have the potential to sustain our growth momentum in the future. Our advertisement activities cost high and this trend would continue in the coming months due to market conditions. The business environment has become very competitive and our profits are affected by commodity inflation, however, operating profit increased from Rs million to Rs million. The Company added Rs million to the net sales, which grew 12.12%. Earnings per Share were Rs We made our humble contribution to the National Exchequer by paying a sum of Rs billion in the shape of Sales Tax, Excise Duty and Income Tax. Financial Results For the year ended 30 June 2013, total sales were Rs billion against Rs billion in the same period last year, registering an increase of 12.12%. The cost of sales was Rs billion against Rs billion last year. Therefore, the Company earned gross profit of Rs billion against Rs billion in the corresponding year last year. Net Sales 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 The distribution cost increased and it grew by 18.81% as compared to the last year. The distribution cost includes an advertisement and sales promotion expense of Rs. 433 million. We had to increase our publicity campaign to boost our sales due to stiff competition in the market. The finance cost was Rs million against Rs million last year. The decrease in finance cost was due to efficient use of borrowed capital. However, borrowings were made during the year to stock the seasonal fruits, pulps and packaging materials to fulfill the sales demands of our products. Net profit for the year was Rs. 249 million as compared to Rs. 207 million of the corresponding year of 2012 and earnings per share were Rs versus Rs (re-stated) in the last year. Earnings per share Rupees ,728, ,528, ,221, ,060, ,674,

8 Directors Report to the Members Appropriations The Company has earned an after tax profit of Rs million for the year under review. The Directors are pleased to recommend as follows: Profit after taxation 249,321 Unappropriated profits brought forward 232,088 Rs 9/- per share for the year ended 30 June 2012 (54,000) Transfer to general reserve (130,000) Transfer to reserve for issue of bonus shares for the year ended June 30, 2012 (6,000) Un-appropriated profits carried forward 291,409 Earnings per share in Rupees Basic Dividend Keeping in view the satisfactory financial results, the Directors have immense pleasure in proposing a cash dividend of 100%, i.e., Rs. 10/- per share and 10% bonus shares. We hope our shareholders would appreciate our paying generous returns on their investment. Future Prospects The coming year appears to be another challenging year for the business as economic environment is not favorable due to the power crisis, internal security issues and soaring inflation. Despite above unfavorable conditions, the Company will continue to focus on cost effectiveness and profit maximization. Looking forward, we are confident that Shezan will achieve growth in juices, syrups and sauces and now expanding production capacity of juice products in tetra packaging. We are hopeful that we will augment our sales growth with the increase in production capacity of juice products. Our marketing force has been focusing on increasing reach of diverse line of products through timely advertisement apart from various promotional activities. Current Inflationary trends and economic conditions depict that commodity costs will remain high in the next year. In addition, payroll expenses will increase due to increase in minimum wages. Corporate Governance and Financial Reporting Frame Work As required by the Code of Corporate Governance, the Directors are pleased to report the following: a. The financial statements, prepared by the management of the Company, present its state of affairs fairly, the result of its operations, cash flows and changes in equity. b. Proper books of account of the Company have been maintained. c. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. d. International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed. e. The system of internal control is sound in design and has been effectively implemented and monitored. f. There are no significant doubts upon the Company s ability to continue as a going concern. g. There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. h. Key operating and financial data of last six years is annexed to this report. i. Where any statutory payment on account of taxes, duties, levies and charges is outstanding, the amount together with brief description and reasons for the same is disclosed. j. Value of investments of provident fund for the year ended 30 June 2013 was Rs million. k. During the year, four Board of Directors meetings were held. Attendance of these meetings was as follows: Name of Director No. of Meetings Attended Mr. Muneer Nawaz 4 Mr. Muhammad Khalid 1 Mr. Mahmood Nawaz 4 Mrs. Amtul Hai Khalid 1 Ms. Nazish Khalid 2 Mr. M. Naeem 3 Mr. Syed Munawar Hussain Rizvi 3 Mr. Saleem Zamindar 4 Leave of absence was granted to the Directors, who could not attend the board meetings. Further due to the sad demise of Mr. C. M. Khalid, Director, Ms. Nazish Khalid was appointed as director during the year. 6

9 Annual Report 2013 l. Pattern of Shareholdings as on 30 June 2013 and its disclosure according to the requirement of Code of Corporate Governance is annexed to this report. m. The Directors, Chief Executive, Chief Financial Officer, Company Secretary and their spouses and minor children shareholding and change therein during the year is disclosed in Categories of Shareholders. Related Party Transactions The Directors confirm the following regarding related party transactions: 1. That the transactions undertaken with related parties during the financial year have been ratified by the Audit Committee and approved by the Board of Directors. 2. That the amounts or appropriate proportions of outstanding, items pertaining to related parties and receivables/payables from the related parties as on 30 June 2013: Name of Related Party Payable Receivable Shezan Services (Private) Limited 32,927 Nil Shahnawaz (Private) Limited Nil There is no other material information pertaining to related party transactions, which is necessary for an understanding of financial statements. Audit Committee The Audit Committee met five times during the year under reference. These meetings were held prior to the approval of interim results of the Company by the Board of Directors and before and after completion of external audit. Attendance by each director was as follows: Name of Director No. of Meetings Attended Mr. Muneer Nawaz 5 Mr. C. M. Khalid 1 Mr. M. Naeem 3 Ms. Nazish Khalid 2 Leave of absence was granted to the Directors, who could not attend the audit committee meetings. Further due to the sad demise of Mr. C. M. Khalid, Member, Ms. Nazish Khalid was appointed as member during the year. Human Resource Committee The Company has formed Human Resource & Remuneration committee, which comprises three directors; all are nonexecutive directors. During the year under review one meeting of the Human Resource & Remuneration Committee was held. Attendance by each director was as follows: Name of Director No. of Meetings Attended Mr. Muneer Nawaz 1 Mr. M. Naeem 1 Mr. Saleem Zamindar 1 Auditors The retiring auditors Messrs. Ernst & Young Ford Rhodes Sidat Hyder, being eligible, offer themselves for re-appointment. The Board of Directors, on recommendations of the Audit Committee, proposes the appointment of Messrs. Ernst & Young Ford Rhodes Sidat Hyder, Chartered Accountants, for the year ending 30 June Statement of Compliance with the Best Practices on Transfer Pricing The Company has fully complied with the best practices on transfer pricing as contained in the listing regulations of the stock exchanges. Corporate Social Responsibilities Disclosure as required by the Corporate Social Responsibility General Order, 2009 is annexed and form integral part of this report. Acknowledgement We are thankful to the valuable consumers of Company s products for their continued patronage for our products, the shareholders for their trust and confidence in the Company. We also place on record our appreciation for the commitment, devotion to duty and hard work of the officers and workers of all categories. On Behalf of the Board Karachi: Muhammad Khalid 25 September Chief Executive 7

10 Corporate Social Responsibility The Company believes that Corporate Social Responsibility is the continuing commitment to behave ethically and contribute to economic development of the workforce and their families as well as of the local community and society at large. Business Ethics and Anti-Corruption Measures Business Ethics which include the practice of honesty and integrity are considered as an essential part in everyday operations of the Company. Since the Company s business is to deal with food and juice products, so it is the policy of the Company to provide not only healthy products to its customers but also ensures clear and coherent view of its product range in all its advertisement campaigns. Further, Statement of Ethics and Business Practices is circulated among all employees of the Company for compliance purposes. It proved very helpful in maintaining the level of credibility of each employee in the organization. Along with all these, the Company has developed procedure and system regarding all key positions to avoid the impact of any corruption and bribery. Industrial Relations Cordial industrial relations and harmonious working environment prevailed at all locations of the Company. The management enjoys good relationship with the employees. CBA elections are held in time and without any hurdles. The basic purpose of this practice is to secure maximum cordiality between the workers and the management and to establish a climate of mutual understanding where-by the workers may be able to contribute their best for the growth and development of the Company. The Company has a Hajj Scheme and two workers were sent to perform Hajj at the Company s expense. The Company also has good relations with the suppliers. Employment of Special Persons To ensure the welfare and rehabilitation of special persons, the Company has especially stressed upon the induction of Disabled Persons in accordance with Employment and Rehabilitation Ordinance, The Company has established a policy regarding the hiring of disable persons with assigning a special quota in compliance with the said ordinance to ensure the protection of deserving persons. Occupational Safety, Health, Environmental Protection and Energy Conservations Safety and Health protection of our employees as well as protection of environment are the Principal concerns of the Company. We firmly believe that commitment to safety health and environmental protection (SHE) is an indispensable part of our main objective of efficiently producing and distributing quality products. Matters of SHE are integral parts of the business planning processes and decision making. They are handled with the same sense of responsibility and just as other operations like quality, productivity and cost-efficiency. We ensure all technical, organizational and personnel measures for the prevention of potentially hazardous situations and to manage incidents or accidents which might occur nevertheless. We strive to achieve eco-efficiency by optimizing resource utilization, conserve energy and avoid damage to environment, employees and public. 8

11 Annual Report 2013 Corporate Philanthropy Shezan management is well aware of the fact that corporate philanthropy is a social responsibility, which is performed by donating to various organizations and associations. National-Cause Donation The Company is committed towards helping distressed communities as and when required. For this purpose, the Company has made donations to various charitable organizations including Marie Adelaide Leprosy Center, Care Foundation, SOS, Children Village, Chhipa Welfare Association, Shaukat Khanum Memorial Cancer Hospital, LRBT, Edhi Foundation, Fatimid Foundation, WWF, Pakistan. Community Investment and Welfare Spending for Under- Privileged Classes The Company has complete focus on the welfare of community as its mandatory role. Since the incorporation of Company in 1964, it has contributed to its maximum in different welfare schemes of the society. Along with all these investments, our management also devoted some area for the community mosque along with the provision of reasonable funds for the construction of said mosque. purposes, our Research and Development department is very much active in regular testing of our product range for their quality conformance. Further, the management is very keen regarding the implementation and execution of ISO rules and regulation for the quality maintenance. Environmental Protection Measures The environmental protection is significantly focused by the management of the Company in its policies to protect the environment from any hazards. The management has planted many plants and trees inside the factory area which shows their complete realization of healthy and pollution-free environment. Contribution to National Exchequer The management has always showed its responsibility by paying all government taxes in time without any delay. For the year ended 30 June 2013 we made our humble contribution to the National Exchequer as follows: Description Income Tax 105,048 Sales Tax and Federal Excise Duty 997,698 Total 1,102,746 Consumer Protection Measures Since the product line of Shezan International Limited mainly consists of Foods & Beverages which are considered among the category of FMCG (Fast Moving Consumer Goods) products, therefore, its key focus is on the healthy products. For this 9

12 Horizontal Analysis of Financial Statements Statement of Financial Position Balance Sheet R u p e e s i n t h o u s a n d % increase/(decrease) over preceding year Non-current assets 769, , , , , , Current assets 1,508,567 1,747,094 1,511,800 1,191,958 1,043,406 1,002,615 (13.65) Total assets 2,277,628 2,195,442 1,945,569 1,619,453 1,354,385 1,308, Total equity 1,311,038 1,115, , , , , Non-current liabilities 50,392 56,682 71,747 91,121 45,684 51,858 (11.10) (21.00) (21.26) (11.91) (9.47) Current liabilities 916,198 1,023, , , , ,497 (10.47) Total equity and liabilities 2,277,628 2,195,442 1,945,569 1,619,453 1,354,385 1,308, Profit and Loss Account Sales-net 5,674,500 5,060,898 4,221,827 3,528,134 2,728,709 2,468, Cost of sales (3,963,874) (3,603,285) (3,130,544) (2,591,790) (1,974,446) (1,691,443) Gross profit 1,710,626 1,457,613 1,091, , , , (2.94) Administrative expenses (162,644) (145,075) (116,605) (101,413) (91,449) (78,951) Distribution cost (1,005,438) (846,287) (629,912) (580,492) (443,862) (368,240) Other operating expenses (139,724) (132,720) (122,601) (90,702) (71,979) (72,555) (0.79) 3.44 Other income 37,257 37,675 28,798 19,448 20,155 19,880 (1.11) (3.51) Operating profit 440, , , , , , (39.72) 2.46 Finance costs (45,756) (53,118) (40,343) (17,950) (6,542) (8,104) (13.86) (19.27) (37.37) Share of loss-associate - (18) (18) (16) (16) (760) (100.00) Profit before taxation 394, , , , , , (40.17) 4.17 Taxation (145,000) (110,700) (70,000) (58,474) (58,099) (107,195) (45.80) (8.37) Net profit for the year 249, , , , , , (36.43) Summary of Cash Flows Net cash generated from Operating activities 377, ,672 98, , , , (42.31) (4.69) (28.37) Net cash used in Investing activities (269,633) (70,688) (59,077) (92,908) (43,338) (54,104) (36.41) (19.90) Net cash used in Financing activities (67,667) (68,423) (56,267) (49,072) (83,314) (89,079) (1.10) (41.10) (6.47) (3.62) Net increase / (decrease) in Cash and cash equivalents 40,432 26,561 (16,901) 28,665 (13,198) (24,144) (158.96) (176.67) 10

13 Vertical Analysis of Financial Statements Annual Report 2013 Statement of Financial Position Balance Sheet Rs. in 000 % Rs. in 000 % Rs. in 000 % Rs. in 000 % Rs. in 000 % Rs. in 000 % Non-current assets 769, , , , , , Current assets 1,508, ,747, ,511, ,191, ,043, ,002, Total assets 2,277, ,195, ,945, ,619, ,354, ,308, Total equity 1,311, ,115, , , , , Non-current liabilities 50, , , , , , Current liabilities 916, ,023, , , , , Total equity and liabilities 2,277, ,195, ,945, ,619, ,354, ,308, Profit and Loss Account Sales-net 5,674, ,060, ,221, ,528, ,728, ,468, Cost of sales (3,963,874) (69.85) (3,603,285) (71.20) (3,130,544) (74.15) (2,591,790) (73.46) (1,974,446) (72.36) (1,691,443) (68.52) Gross profit 1,710, ,457, ,091, , , , Administrative expenses (162,644) (2.87) (145,075) (2.87) (116,605) (2.76) (101,413) (2.87) (91,449) (3.35) (78,951) (3.20) Distribution cost (1,005,438) (17.72) (846,287) (16.72) (629,912) (14.92) (580,492) (16.45) (443,862) (16.27) (368,240) (14.92) Other operating expenses (139,724) (2.46) (132,720) (2.62) (122,601) (2.90) (90,702) (2.57) (71,979) (2.64) (72,555) (2.94) Other income 37, , , , , , Operating profit 440, , , , , , Finance costs (45,756) (0.81) (53,118) (1.05) (40,343) (0.96) (17,950) (0.51) (6,542) (0.24) (8,104) (0.33) Share of loss-associate - - (18) - (18) - (16) - (16) - (760) - Profit before taxation 394, , , , , , Taxation (145,000) (2.56) (110,700) (2.19) (70,000) (1.66) (58,474) (1.66) (58,099) (2.13) (107,195) (4.34) Net profit for the year 249, , , , , ,

14 Statement of Value Addition Statement of Financial Position % % Wealth Generated Sales-net 5,674, ,060, Other income 37, , ,711, ,098, Distribution of Wealth Cost of sales 3,818, ,471, (excluding employees remuneration and provident fund) Distribution, administrative & other Operating expenses 1,015, , (excluding employees remuneration and other duties) Employees remuneration 408, , Finance costs 45, , Government taxes and levies (Income tax, WPPF and WWF) 173, , Dividend to shareholders 66, , Retained for future growth 183, , Charity and donation ,711, ,098,

15 Pattern of Shareholdings as at 30 June 2013 Annual Report Incorporation Number: Name of Company: Shezan International Limited. 3. Pattern of holding of the shares held by the shareholders as at 30 June Shareholding No. of Shareholders From To Total Shares Held , , ,000 51, ,001 5, , ,001 10,000 56, ,001 15,000 62, ,001 20,000 33, ,001 25,000 21, ,001 30,000 86, ,001 40,000 72, ,001 45,000 40, ,001 60,000 57, ,001 70,000 66, ,001 85,000 83, ,001 90,000 85, , ,000 95, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,255,001 1,260,000 1,255, ,600, Categories of Shareholders Shares held Percentage 5.1 Directors, Chief Executive Officers and their spouse and minor children 1,770, % 5.2 Associated Companies, undertakings and related parties % 5.3 NIT and ICP 1,284, % 5.4 Banks, Development Financial Institutions, Non Banking Financial Institutions % 5.5 Insurance Companies 58, % 5.6 Modarabas and Mutual funds 7, % 5.7 Share holders holding 10% 1,255, % 5.8 General Public a. Local 2,975, % b. Foreign 5.9 Others (to be specified) Joint Stock Companies 1, % Pension Funds 114, % Investment Companies 381, % Others 4, % 13

16 Pattern of Shareholdings as at 30 June 2013 S. No. NAME HOLDING %AGE Directors, CEO their Spouses & Minor Children 1 Mrs. Amtul Hai Khalid 116, % 2 Mr. Mahmood Nawaz 616, % Mr. Mahmood Nawaz (CDC) 27, % 3 Mr. Muneer Nawaz 497, % 4 Mr. C. M. Khalid 95, % 5 Mr. M. Naeem 40, % 6 Mr. Muhammad Khalid (CDC) 2, % 7 Mr. Saleem Zamindar (NIT Nominee) 8 Mr. Syed Munawar Hussain Rizvi (NIT Nominee) 9 Mrs. Abida Muneer Nawaz W/o Mr. Muneer Nawaz 66, % 10 Mrs. Bushra Mahmood Nawaz W/o Mr. Mahmood Nawaz 4, % 11 Mrs. Amtul Bari Naeem W/o Mr. M. Naeem 218, % Mrs. Baree Naeem W/o Mr. M. Naeem 83, % 12 Mrs. Surriya Khalid W/o Mr. Muhammad Khalid % 1,770, % Associated Companies NIT & ICP 1 National Bank of Pakistan, Trustee Department NI(U)T Fund (CDC) 1,255, % 2 National Investment Trust Limited (CDC) 29, % 1,284, % Banks, Developments, Financial Institutions, Non Banking Financial Institutions 1 National Bank of Pakistan (CDC) % 2 National Bank of Pakistan (CDC) % % Modaraba & Mutual Funds 1 MCBFSL-Trustee URSF-Equity Sub Fund (CDC) 7, % 7, % Insurance Companies 1 Habib Insurance Company Limited (CDC) 1, % 2 State Life Insurance Corporation of Pakistan (CDC) 57, % 58, % Pension Funds 1 Trustee National Bank of Pakistan Employees Pension Fund (CDC) 114, % 114, % Investment Companies 1 Tundra Agri & Food (CDC) 17, % 2 Tundra Frontier Opportunities Fund (CDC) 10, % 3 Tundra Pakistan Fond (CDC) 354, % 381, % 14

17 Annual Report 2013 S. No. NAME HOLDING %AGE Joint Stock Companies 1 Murree Brewery Company Limited % 2 A. Sattar Motiwal Securities (Private) Limited (CDC) % 3 Burma Oil Mills Limited (CDC) % 4 Darson Securities (Private) Limited (CDC) % 5 Ismail Abdul Shakoor Securities (Private) Limited (CDC) % 6 Magnus Investment Advisors Limited (CDC) % 7 N. H Capital Fund Limited (CDC) % 8 Pearl Capital Management (Private) Limited (CDC) % 1, % Others 1 Trustee National Bank of Pakistan Employee Benevolent Fund Trust (CDC) 4, % 4, % Executives 1 Mr. Waseem Amjad Mahmood % 2 Mr. Waseem Amjad Mahmood (CDC) % % Shares Held by the General Public 2,975, % 6,600, % Shareholders Holding 10% or More of Total Capital 1 National Bank Of Pakistan, Trustee Department NI(U)T Fund (CDC) 1,255, % 1,255, % Shareholders Holding 5% or More of Total Capital 1 National Bank Of Pakistan, Trustee Department NI(U)T Fund (CDC) 1,255, % 2 Mr. Mahmood Nawaz 643, % 3 Ms. Amina Wadalawala 638, % 4 Mr. Muneer Nawaz 497, % 3,034, % During the financial year the trading / movement in shares of the Company by the directors, CEO, CFO, Company Secretary and their spouses and minor children is as follows: S. No. Name Sale Purchase Bonus 1 Mrs. Amtul Hai Khalid 10,593 2 Mr. Mahmood Nawaz 56,027 3 Mr. Mahmood Nawaz (CDC) 2,500 4 Mr. Muneer Nawaz 45,234 5 Mr. C. M. Khalid 8,639 6 Mr. M. Naeem 3,698 7 Mr. Muhammad Khalid (CDC) Mrs. Abida Muneer Nawaz W/o Mr. Muneer Nawaz 6,012 9 Mrs. Bushra Mahmood Nawaz W/o Mr. Mahmood Nawaz Mrs. Amtul Bari Naeem W/o Mr. M. Naeem 19, Mrs. Baree Naeem W/o Mr. M. Naeem 7, Mrs. Surriya Khalid W/o Mr. Muhammad Khalid 60 15

18 Six Years Review at a Glance Net Sales Profit After Tax 6,000, ,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 2,468,572 2,728,709 3,528,134 4,221,827 5,060,898 5,674, , , , ,000 80,000 40,00 161, , , , , , Year Year Year Year Year Year Income Sales 2,468,572 2,728,709 3,528,134 4,221,827 5,060,898 5,674,500 Other operating income 19,880 20,155 19,448 28,798 37,675 37,257 2,488,452 2,748,864 3,547,582 4,250,625 5,098,573 5,711,757 Expenditure Cost of sales 1,691,443 1,974,446 2,591,790 3,130,544 3,603,285 3,963,874 Distribution cost and administrative expenses 447, , , , ,362 1,168,082 Finance cost 8,104 6,542 17,950 40,343 53,118 45,756 Other operating expenses and share of 73,315 71,995 90, , , ,724 loss from associate 2,220,053 2,588,294 3,382,363 4,040,023 4,780,503 5,317,436 Profit before taxation 268, , , , , ,321 Taxation 107,195 58,099 58,474 70, , ,000 Profit after Taxation 161, , , , , ,321 Paid-up capital 60,000 60,000 60,000 60,000 60,000 66,000 Reserves & unappropriated profits 676, , , ,740 1,055,381 1,244,781 Unrealized gain / (loss) on remeasurement (200) (1,351) (1,978) of investments available for sale Share holders equity 736, , , ,011 1,115,460 1,311,038 Break up value per share in Rupees Earnings per share in Rupees * Dividend declared Bonus per share 10% 10% * Restated 16

19 Review Report to the Members Annual Report 2013 On the statement of compliance with the best practices of the code of corporate governance We have reviewed the Statement of Compliance with the best practices (the Statement) contained in the Code of Corporate Governance (the Code) prepared by the Board of Directors of Shezan International Limited (the Company) to comply with the Listing Regulation No. 35 of the Karachi Stock Exchange Limited and Lahore Stock Exchange Limited, where the Company is listed. The responsibility for compliance with the Code is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement reflects the status of the Company s compliance with the provisions of the Code and report if it does not. A review is limited primarily to inquiries of the Company s personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board s statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company s corporate governance procedures and risks. Further, the Listing Regulations of the Karachi Stock Exchange Limited and Lahore Stock Exchange Limited requires the Company to place before the Board of Directors for their consideration and approval of related party transactions, distinguishing between transactions carried out on terms equivalent to those that prevail in arm s length transactions and transactions which are not executed at arm s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the board of directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm s length price or not. Based on our review, nothing has come to our attention, which causes us to believe that the Statement does not appropriately reflect the status of the Company s compliance, in all material respects, with the best practices contained in the Code, for the year ended 30 June Chartered Accountants Lahore: Audit Engagement Partner 25 September Farooq Hameed 17

20 Statement of Compliance with the best practices of the code of corporate governance This statement is being presented to comply with the Code of Corporate Governance (the Code ) contained in the Listing Regulations of Karachi and Lahore Sock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner: 1. The Company encourages the representation of non-executive directors and directors representing minority interests on its Board of Directors. At present the Board includes Category Executive Directors Non-Executive Directors Names Mr. Muhammad Khalid Mr. Mahmood Nawaz Mr. Muneer Nawaz Mrs. Amtul Hai Khalid Mr. M. Naeem Ms. Nazish Khalid Mr. Syed Munawar Hussain Rizvi Mr. Saleem Zamindar 2. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this Company. 3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. Casual vacancy occurred on the board and was filled up by the directors within 90 days. 5. The Company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO, other executive and non-executive directors, have been taken by the Board/shareholders. 8. The meetings of the Board were presided over by the Chairman and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 10. The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment. 11. The Directors Report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The Directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholdings. 14. The Company has complied with all the corporate and financial reporting requirements of the Code. 15. The Board has formed an Audit Committee. It comprises three members, all are non-executive directors and the chairman of the committee is not an independent director. 16. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the Committee have been formed and advised to the Committee for compliance. 17. The Board has formed a Human Resource and Remuneration Committee. It comprises three members; all are non-executive directors including the chairman. 18. The Board has set up an effective internal audit function with suitably qualified and experienced staff conversant with the policies and procedures of the Company. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. The closed period, prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of Company s securities, was determined and intimated to directors, employees and stock exchange(s). 22. Material/price sensitive information has been disseminated among all market participants at once through stock exchange(s). 23. We confirm that all other material principles enshrined in the Code have been complied with except for the changes not effective immediately, which shall be complied with upon the next election of directors. 9. The Board arranged briefings for its Directors to apprise them of their duties and responsibilities. Muneer Nawaz Chairman Muhammad Khalid Chief Executive 18

21 Auditors Report to the Members Annual Report 2013 We have audited the annexed balance sheet of Shezan International Limited (the Company) as at 30 June 2013 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, Our responsibility is to express an opinion on these statements based on our audit. We conduct our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; (b) in our opinion; i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied except for changes as stated in note 5.1 of these financial statements, with which we concur; ii) the expenditure incurred during the year was for the purpose of the Company s business; and iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company. (c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company s affairs as at 30 June 2013 and of the profit, its cash flow and changes in equity for the year then ended; and (d) in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the central Zakat fund established under section 7 of the Ordinance. Chartered Accountants Lahore: Audit Engagement Partner 25 September Farooq Hameed 19

22 Balance Sheet as at 30 June 2013 Note ASSETS NON-CURRENT ASSETS Property, plant and equipment 6 764, ,590 Investment in associate 7 7,672 Investment available for sale 8 1, Long term deposits and prepayments 9 3,208 5, , ,348 CURRENT ASSETS Stores and spares 10 28,051 15,408 Stock in trade ,614 1,245,699 Trade debts , ,299 Loans and advances 13 14,048 25,486 Trade deposits and short term prepayments 14 23,763 37,956 Accrued financial income Investment available for sale 16 9,860 Income tax recoverable 35,227 69,640 Cash and bank balances , ,169 1,508,567 1,747,094 TOTAL ASSETS 2,277,628 2,195,442 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Share capital 18 66,000 60,000 Reserves , ,372 Unappropriated profit 291, ,088 TOTAL EQUITY 1,311,038 1,115,460 NON-CURRENT LIABILITIES Deferred taxation 20 50,392 56,682 CURRENT LIABILITIES Trade and other payables , ,119 Mark up accrued on short term borrowings 5,988 9,220 Short term borrowings - secured , ,656 Current portion of liabilities against assets subject to finance lease 13,844 Provision for taxation 151, , ,198 1,023,300 TOTAL LIABILITIES 966,590 1,079,982 CONTINGENCIES AND COMMITMENTS 23 TOTAL EQUITY AND LIABILITIES 2,277,628 2,195,442 The annexed notes from 1 to 41 form an integral part of these financial statements. Muneer Nawaz Chairman Muhammad Khalid Chief Executive 20

23 Profit and Loss Account Annual Report 2013 Note Sales - net 24 5,674,500 5,060,898 Cost of sales 25 3,963,874 3,603,285 Gross profit 1,710,626 1,457,613 Distribution cost 26 1,005, ,287 Administrative expenses , ,075 Other operating expenses , ,720 Other operating income 29 (37,257) (37,675) 1,270,549 1,086,407 Operating profit 440, ,206 Finance costs 30 45,756 53,118 Share of loss - associate 7 18 Profit before taxation 394, ,070 Taxation , ,700 Net profit for the year 249, ,370 Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods Unrealized gain on remeasurement of investments- available for sale Total comprehensive income 249, ,449 Restated Earnings per share - basic and diluted (Rupees) The annexed notes from 1 to 41 form an integral part of these financial statements. Muneer Nawaz Chairman Muhammad Khalid Chief Executive 21

24 Cash Flow Statement Note CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Profit before taxation 394, ,070 Adjustments for: Depreciation 128,007 56,668 Interest/mark-up 42,654 50,756 Profit on bank deposits (3,564) (2,900) Impairment in the value of investment in associate 172 Deterioration in value of shells, pallets and barrels 17,311 Provision for doubtful advance 4,495 Share of loss from associate 18 Gain on disposal of property, plant and equipment (777) (4,993) 166, ,355 Operating profit before working capital changes 560, ,425 (Increase)/decrease in current assets Stores and spares (13,424) (8,411) Stock in trade 59,781 (103,459) Trade debts (5,696) (77,672) Loans and advances 11,438 (1,184) Trade deposits and short-term prepayments 14,193 (23,273) 66,292 (213,999) Increase/(decrease) in current liabilities Trade and other payables 39,676 (36,298) Short term borrowings - secured (141,708) 88,915 (102,032) 52,617 CASH GENERATED FROM OPERATIONS 525, ,043 Interest/mark-up paid (45,886) (45,570) Profit on bank deposits - received 3,593 2,839 Income tax paid (105,048) (69,640) NET CASH GENERATED FROM OPERATING ACTIVITIES 377, ,672 CASH FLOW FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (264,867) (74,077) Sale proceeds from disposal of property, plant and equipment 3,103 6,414 Long term deposits paid / received 2,131 (3,025) Investment - available for sale (10,000) NET CASH USED IN INVESTING ACTIVITIES (269,633) (70,688) CASH FLOW FROM FINANCING ACTIVITIES Repayment of liabilities against assets subject to finance lease (13,844) (23,490) Dividends paid (53,823) (44,933) NET CASH USED IN FINANCING ACTIVITIES (67,667) (68,423) NET INCREASE IN CASH AND CASH EQUIVALENTS 40,432 26,561 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 109,169 82,608 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR , ,169 The annexed notes from 1 to 41 form an integral part of these financial statements. 22 Muneer Nawaz Chairman Muhammad Khalid Chief Executive

25 Statement of Changes in Equity Annual Report 2013 Capital Reserve Revenue Reserve Unrealized (loss)/gain on remeasurement Share Merger Reserve for General of Investments - Unappropriated Capital Reserve Bonus Issue Reserve available for sale Profits Total Balance as at 01 July ,000 5, ,000 (1,707) 169, ,011 Transfer to general reserve 100,000 (100,000) Rs. 7.5/- per share for the year ended 30 June 2011 (45,000) (45,000) Net profit for the year ended 30 June , ,370 Other comprehensive income Total comprehensive income , ,449 Balance as at 30 June ,000 5, ,000 (1,628) 232,088 1,115,460 Transfer to general reserve 130,000 (130,000) Rs. 9/- per share for the year ended 30 June 2012 (54,000) (54,000) Transfer to reserve for issue of bonus shares 6,000 (6,000) Issue of bonus 10% for the year ended 30 June ,000 (6,000) Net profit for the year ended 30 June , ,321 Other comprehensive income Total comprehensive income , ,578 Balance as at 30 June ,000 5, ,000 (1,371) 291,409 1,311,038 The annexed notes from 1 to 41 form an integral part of these financial statements. Muneer Nawaz Chairman Muhammad Khalid Chief Executive 23

26 Notes to the Financial Statements 1 THE COMPANY AND ITS OPERATIONS The Company is a Public Limited Company incorporated in Pakistan and is listed on Lahore and Karachi Stock Exchanges. The registered office of the Company is situated at 56 - Bund Road, Lahore, Pakistan. It is engaged in the manufacturing, trading and sale of juices, pickles, jams, ketchups etc., based upon or derived from fresh fruits and vegetables. 2 STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. 2.1 Standards, interpretations and amendments to published approved accounting standards effective in New and amended standards and interpretations The Company has adopted the following new and amended IFRS and IFRIC interpretations which became effective during the year: IAS-1 IAS 12 Presentation of Financial Statements- Presentation of other Comprehensive Income (Amendment). Income Taxes- Recovery of Underlying Assets (Amendment) The adoption of the above standards, amendments / improvements and interpretations did not have any significant effect on the financial statements Standards, Interpretations and amendments to published approved accounting standards that are not yet effective: The following revised standards, amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation: Standard or Interpretation Effective Date (Annual periods beginning on or after) IFRS 7 Financial Instruments : Disclosures (Amendments) -Amendments enhancing disclosures about offsetting of financial assets and financial liabilities 01 January 2013 IAS 19 Employee Benefits (Revised) 01 January 2013 IAS 32 Offsetting Financial Assets and Financial liabilities (Amendment) 01 January 2014 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 01 January 2013 The Company expects that the adoption of the above revisions, amendments and interpretations of the standards will not affect the Company s financial statements in the period of initial application. In addition to the above, the following new standards have been issued by IASB which are yet to be notified by the Securities and Exchange Commission of Pakistan for the purpose of applicability in Pakistan. Standard or Interpretation IASB Effective date (Annual periods beginning on or after) IFRS 9 Financial Instruments: Classification and Measurement 01 January 2015 IFRS 10 Consolidated Financial Statements 01 January 2013 IFRS 11 Joint Arrangements 01 January 2013 IFRS 12 Disclosure of Interests in Other Entities 01 January 2013 IFRS 13 Fair Value Measurement 01 January

27 Notes to the Financial Statements Annual Report BASIS OF PREPARATION 3.1 Basis of Measurement These financial statements have been prepared under historical cost convention, except for investments classified as available for sale which are stated at fair value. 3.2 Presentation Currency These financial statements are presented in Pak Rupee, which is the Company s functional currency. Figures have been rounded off to the nearest thousand of rupees, unless otherwise stated. 4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company s accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. These estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The areas involving a higher degree of judgments or complexity or areas where assumptions and estimates are significant to the financial statements are as follows: 4.1 Provision for taxation In making the estimate for income tax payable by the Company, the Company takes into account the applicable tax laws and the decision by appellate authorities on certain issues in the past. 4.2 Provision for doubtful receivables The Company reviews its doubtful trade debts at each reporting date to assess whether provision should be recorded in the profit and loss account. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provision required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the provisions. 4.3 Useful life and residual values of property, plant and equipment The Company reviews appropriateness of the rate of depreciation, useful life and residual value used in the calculation of depreciation. Further, where applicable, an estimate of the recoverable amount of assets is made for possible impairment on an annual basis. In making these estimates, the Company uses the technical resources available with the Company. Any change in the estimates in the future might affect the carrying amount of respective item of property, plant and equipment, with corresponding effects on the depreciation charge and impairment. 4.4 Impairment of non-financial assets The Company assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Non-financial assets are also tested for impairment when there are indicators that the carrying amounts may not be recoverable. 4.5 Provision for compensated absences The Company accounts for compensated absences on the basis of un-availed earned leave balance of each employee at the end of the year. 5 SIGNIFICANT ACCOUNTING POLICIES 5.1 The accounting policies adopted in the preparation of these financial statements are consistent with those of previous financial year except as mentioned in note 2.2 and note Change in Accounting Policy During the year the Company changed its accounting policy for classification of empty bottles, shells, pallets and barrels from Inventory to property, plant and equipment so as to give a better presentation. Previously these items were considered to be of a fragile nature and hence were not expected to last long. However recent experience indicates that such items have been in utilization of the Company for an extended period of time and accordingly the recently adopted policy provides reliable and more relevant information. 25

28 Notes to the Financial Statements The policy has been applied prospectively because it was not practicable to estimate the effects of applying the policy either retrospectively or prospectively from any earlier date. Accordingly, the adoption of the new policy has no effect on prior years. The effect on the current year is to increase the closing carrying amount of property, plant and equipment by Rs. (thousand) 185,892 decrease in closing carrying amount of inventory by Rs. (thousand) 227,755 increase depreciation expense by Rs. (thousand) 61,953 decrease in deterioration in Shells, Pallets and Barrels by Rs. (thousand) 20,090 and reduce tax expense by Rs. (thousand) 5, Property, plant and equipment Owned assets Property, plant and equipment except for freehold land and leasehold land held on 99 years lease, are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Free hold and lease hold land are also stated at cost. Depreciation is calculated using the reducing balance method at rates disclosed in note 6, which are considered appropriate to write off the cost of the assets over their useful lives. Depreciation on additions is charged from the month in which an asset is available for use while no depreciation is charged for the month in which the asset is disposed off. The carrying amounts of the Company s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment is recognized in the income currently. The recoverable amount is the higher of an asset s fair value less cost to sell and value in use. Where an impairment loss is recognized, the depreciation charge is adjusted for the future periods to allocate the asset s revised carrying amount over its estimated useful life. Subsequent costs are included in the asset s carrying amount or recognized as separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred. The gain or loss on disposal or retirement of an asset represents the difference between the sale proceeds and the carrying amount of the asset and is recognized as an income or expense in the period it relates. Capital work in progress These are stated at cost including capitalization of borrowing costs. It consists of expenditures incurred and advances made in respect of fixed assets in the course of their construction and installation. Leased assets Leases where the Company has the substantially all the risks and rewards of ownership are classified as finance leases. At inception, finance leases are capitalized at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets. The related rental obligations, net of finance cost, are included in liabilities against assets subject to finance lease as referred to in note 19. The liabilities are classified as current and non-current depending upon the timing of the payment. Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The interest element of the rental is charged to profit over the lease term. The financial charges are calculated at the interest rates implicit in the lease and are charged to the profit and loss account. Assets held under finance lease are stated at cost less accumulated depreciation and accumulated impairment losses, if any, at the rates and basis applicable to Company owned assets. 26

29 Notes to the Financial Statements Annual Report Ijarah assets The Company recognizes ijarah payments under an Ijarah agreement as an expense in the profit and loss account on a straight line basis over the Ijarah term. 5.5 Investments Investments in associates The Company s investment in its associate is accounted for under the equity method of accounting. An associate is an entity in which the Company has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the balance sheet at cost plus post-acquisition changes in the Company s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortized. After application of the equity method, the Company determines whether it is necessary to recognize any additional impairment loss with respect to the Company s net investment in the associate. The profit and loss account reflects the share of the results of the operations of the associate. Where there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes and discloses this, when applicable, in the statement of changes in equity. The reporting dates of the associate and the Company are identical and the associate s accounting policies conform to those used by the Company for like transactions and events in similar circumstances. Available for sale Available for sale investments, after initial recognition, are measured at fair value with gains or losses being recognized as a separate component of equity until the investment is derecognized or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the profit and loss account. The fair value of investments, which are actively traded in organized financial markets, is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm s length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models. 5.6 Stores, spares and stock in trade Stocks, stores and spares are valued at lower of cost or net realizable value except those in transit, which are valued at invoice value including other charges, if any, incurred thereon. Basis of determining cost is as follows: - Raw materials Packing material Finished goods Pulps, concentrates etc. Stores and spares Stock in transit Monthly average Monthly average Quarterly average Manufacturing cost according to annual average method Monthly average Cost Net realizable value is determined on the basis of estimated selling price of the product in the ordinary course of business less costs of completion and costs necessary to be incurred for its sale. 5.7 Trade debts Trade debts are carried at invoice amount on transaction date less any estimate for doubtful receivable. Known bad debts are written off as and when identified. 5.8 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cheques in hand, cash at bank in current, saving and deposit accounts and other short term highly liquid instruments that are readily convertible into known amount of cash and which are subject to an insignificant risk of changes in value. 27

30 Notes to the Financial Statements 5.9 Financial instruments All the financial assets and financial liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instruments. The Company derecognizes a financial asset or a portion of financial asset when, and only when, the enterprise loses control of the contractual rights that comprise the financial asset or portion of financial asset. While a financial liability or part of financial liability is derecognized from the balance sheet when, and only when, it is extinguished, i.e., when the obligation specified in the contract is discharged, cancelled or expires. Financial assets are investments, deposits, trade debts, other receivables, cash and bank balances. These are stated at their nominal values as reduced by the appropriate allowances for estimated irrecoverable amount. Financial liabilities are classified according to the substance of the contractual arrangements entered into. Significant financial liabilities are short term running finance utilized under mark-up arrangements, creditors, accrued and other liabilities. Mark-up bearing finances are recorded at the gross proceeds received. Other liabilities are stated at their nominal value Impairment The carrying amount of the Company s asset is reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such assets is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit and loss account Offsetting of financial assets and financial liabilities A financial asset and financial liability is offset and the net amount is reported in the balance sheet if the Company has a legal enforceable right to set off the recognized amounts and intends either to settle on net basis or to realize the assets and settle the liabilities simultaneously Dividend and appropriation to reserves Dividend and appropriation to reserves are recognized as a liability in the Company s financial statements in the period in which these are approved Taxation Current Provision for current taxation is based on taxable income at the current rate of tax after taking into account applicable tax credits, rebates and exemptions available, if any. The charge for the current tax includes adjustments to charge for prior years, if any. Deferred Deferred tax is provided in full using the balance sheet liability method on all temporary differences arising at the balance sheet date, between the tax bases of the assets and liabilities and their carrying values. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. The carrying amounts of all deferred tax assets are reviewed at each balance sheet date and reduced to the extent, if it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilized. The tax rates enacted at the balance sheet date are used to determine deferred tax. 28

31 Notes to the Financial Statements Annual Report Revenue recognition Sale of goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer which generally coincides with the delivery of goods to customers. Interest income Return on bank deposit is accrued on a time proportion basis by reference to the principal outstanding on the applicable rate of return. Dividend income It is recognized when the Company s right to receive the payment is established Staff retirement benefits The Company operates a recognized provident fund scheme (Defined contribution plan) for all permanent employees. Equal monthly contributions are made both by the Company and the employees to the fund Compensated absences The Company accounts for compensated absences on the basis of un-availed earned leave balance of each employee at the end of the year Borrowing costs Borrowing costs directly attributable to acquisition, construction, or production of an asset that necessarily takes substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. Borrowing cost consists of interest and other costs that an entity incurs in connection with the borrowing of funds Foreign currency transactions Foreign currency transactions are converted into rupees at the rates prevailing on the date of transactions. Monetary assets and liabilities in foreign currencies are translated into rupees at the rates of exchange prevailing at the date of balance sheet. Gain or losses arising on translation are recognized in the profit and loss account Pricing for related party transactions All transactions with related parties and associated undertakings are entered into arm s length determined in accordance with comparable uncontrolled price method except for transactions with M/s. Shahnawaz (Private) Limited, where an additional discount of 40% is given by them on service charges and 15% on spare parts in connection with the repairs of motor vehicles, due to group policy duly approved by the Board of Directors Provisions A provision is recognized in the balance sheet when the Company has a legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. 29

32 Notes to the Financial Statements Note PROPERTY, PLANT AND EQUIPMENT Operating property, plant and equipment , ,264 Capital work in progress ,542 56, , , OPERATING PROPERTY, PLANT AND EQUIPMENT NET BOOK COST DEPRECIATION VALUE As at As at Accumulated Charge Accumulated As at 01 July Additions/ (Disposals) / 30 June as at (Disposals)/ for as at 30 June Note 2012 Adjustments Adjustments July 2012 Adjustments the year 30 June Rate % OWNED ASSETS Freehold land 7, , ,091 - Leasehold land 1, , ,802 - Buildings on freehold land 51,663 11,896-63,559 25,750-3,307 29,057 34, Buildings on leasehold land 23,962 5,729-29,691 15,267-1,299 16,566 13, Plant and machinery , ,317 (211) 547, ,021 (104) 27, , , ,379 21,261 Furniture and fixtures 16, ,308 5,472-1,622 7,094 9, Motor vehicles & bicycles 130,881 16,018 (8,304) 138,595 71,734 (6,484) 13,513 78,763 59, Electric fittings and tools 5, ,804 3, ,655 2, Electric equipment ,476 34,007 (2,765) 100,718 25,032 (2,366) 12,922 35,588 65, Laboratory equipment 1, , Forklifts 26, ,624 17,340-1,857 19,197 7, Computers and accessories 13,103 1,389-14,492 10,354-1,134 11,488 3, Arms and ammunitions Empty bottles, shells ,260 (23,415) 247, ,953 61, , pallets and barrels 709, ,651 31,684 1,201, ,082 12, , , ,167 ASSETS SUBJECT TO FINANCE LEASE Plant and machinery 66,379 - (66,379) - 18,252 (21,261) 3, , ,651 (34,695) 1,201, ,334 (8,954) 128, , ,167 OWNED ASSETS NET BOOK COST DEPRECIATION VALUE As at As at Accumulated Charge Accumulated As at 01 July Additions/ (Disposals) / 30 June as at (Disposals)/ for as at 30 June Note 2011 Adjustments Adjustments July 2011 Adjustments the year 30 June Rate % Freehold land 7, , ,091 - Leasehold land 1, , ,802 - Buildings on freehold land 51, ,663 22,871-2,879 25,750 25, Buildings on leasehold land 23, ,962 14, ,267 8, Plant and machinery 341,305 20,274 (740) 360, ,445 (587) 21, , , Furniture and fixtures 12,183 4,090-16,273 4,227-1,245 5,472 10, Motor vehicles & bicycles 120,975 18,374 (8,468) 130,881 66,241 (7,302) 12,795 71,734 59, Electric fittings and tools 5, ,804 3, ,416 2, Electric equipment ,020 9,965 (509) 69,476 18,498 (411) 6,945 25,032 44, Laboratory equipment 1, , , Forklifts 26, ,624 15,019-2,321 17,340 9, Computers and accessories 12, (324) 13,103 9,539 (320) 1,135 10,354 2, Arms and ammunitions ,215 54,045 (10,041) 709, ,909 (8,620) 49, , ,137 ASSETS SUBJECT TO FINANCE LEASE Plant and machinery 66, ,379 11,377-6,875 18,252 48, ,594 54,045 (10,041) 775, ,286 (8,620) 56, , ,264 30

33 Notes to the Financial Statements Annual Report Additions to plant and machinery includes transfer from leased assets having net book value of Rs. (thousand) 45,118 (2012: Rs. (thousand) Nil) representing cost of Rs. (thousand) 66,379 (2012: Rs. (thousand) Nil) less accumulated depreciation of Rs. (thousand) 21,261 (2012: Rs. (thousand) Nil) Visi coolers costing Rs.(thousand) 23,248 (2012: Rs. (thousand) 2,579) are in the possession of shopkeepers for the sale of Company s products This amount has been reclassified from Inventory as a result of change in accounting policy as explained in note 5.2. These include bottles and shells amounting to Rs. (thousand) 152,313 held by distributors of the Company in the normal course of business. 6.2 CAPITAL WORK IN PROGRESS COST Furniture & Plant & Land* Fixtures Machinery** Vehicles Buildings Balance as at 01 July ,007 5,636 12,199 2,132 1,352 56,326 40,789 Additions during the year 35, ,728 22,504 16, ,399 41,953 Transferred to operating property, plant and equipment (5,729) (67,427) (16,018) (17,625) (106,799) (21,921) Transferred to loans and advances (7,384) (7,384) (4,495) Balance as at 30 June , ,500 1,234 79,542 56,326 * This represents advance given to Punjab Industrial Estate (PIE).The possession and title will be transferred to Company in due course. ** This represents fair value of plant and machinery acquired from Hattar Food Products (Private) Limited as explained in note 7. Latest valuation was carried out by M/s. Surval, an independent evaluator, as on 30 June Note Depreciation charge for the year has been allocated as follows: Cost of sales ,804 34,382 Distribution cost 26 38,980 14,940 Administrative expenses 27 9,074 7,346 Other operating expenses 28 6, ,007 56,668 7 INVESTMENT IN ASSOCIATE The investment represented Nil (30 June 2012: 44.88%) of the issued share capital of the Hattar Food Products (Private) Limited (HFPPL). The principal business activity of HFPPL was to process food products. During the year, HFPPL has applied for winding up under Company Easy Exit Scheme (CEES). HFPPL has transferred the plant and machinery to the Company, based on the independent valuation report, in settlement of its investment Hattar Food Products (Private) Limited - unquoted Opening carrying amount 7,672 7,690 Share of (loss) from associate for the year (18) Impairment 29 (172) Assets acquired in settlement on winding up (7,500) 7,672 8 INVESTMENT AVAILABLE FOR SALE Quoted Modaraba BRR Guardian Modaraba-Credit rating A 305,000 (2012: 305,000) certificates of Rs. 10/- each 8.1 2,375 2,375 Loss on remeasurement (1,231) (1,628) 8.1 The above investment represents 0.39% (2012: 0.39%) of the issued certificate capital of the Modaraba. 1,

34 Notes to the Financial Statements 9 LONG TERM DEPOSITS AND PREPAYMENTS Note Deposits Utility companies 1,568 1,568 Others 1,640 1,626 Prepayments Rent 2,145 2,145 Less: current maturity (2,145) 10 STORES AND SPARES 3,208 5,339 Stores 781 Spares 28,051 14, STOCK IN TRADE 28,051 15,408 Raw materials 124, ,919 Packing materials 338, ,648 Bottles ,648 Finished goods 146, ,499 Pulps, concentrates etc , ,741 Shells, pallets and barrels ,967 Less: deterioration in value 17,311 69,656 Goods in transit 23,976 11, ,614 1,245, Bottles, shells, pallets and barrels have been transferred to the property, plant and equipment due to change in accounting policy as explained in note 5.2. Comparative figures includes bottles and shells amounting to Rs. (thousand) 121,732 held by distributors of the Company in the normal course of business These include pulps amounting to Rs. (thousand) 83,578 (2012: Rs. (thousand) 79,800) held with third parties in the normal course of business. Note TRADE DEBTS Unsecured-considered good Due from related parties Others 248, , , ,299 Considered doubtful - others 1,350 1,350 Less: Provision for doubtful debts 1,350 1, , , No amount is receivable from the Chief Executive, Directors and Executives of the Company (2012: Rs. (thousand) Nil). 32

35 Notes to the Financial Statements Annual Report LOANS AND ADVANCES Note Advances to distributors - secured, considered good ,386 4,159 Advances - unsecured, considered good Staff ,093 3,419 Suppliers 7,569 17,763 Related parties 145 Advances - unsecured, considered doubtful Suppliers ,595 4,595 Less: provision for doubtful advances 4,595 4,595 14,048 25, This represents the advances given to the distributors for the purchase of vehicles for the distribution of products of the Company. These are secured against vehicles, registered in the name of the Company No advances were given to the Chief Executive, Directors and Executives of the Company (2012: Rs. (thousand) Nil) This includes advance given to supplier for the purchase of vehicles Rs. (thousand) 4,495 (2012: Rs. (thousand) 4,495). 14 TRADE DEPOSITS AND SHORT TERM PREPAYMENTS Short term deposits 7,058 22,000 Prepayments 14,560 14,150 Current maturity of long term prepayments 2,145 Advance excise duty 372 Wealth tax recoverable 140 Sales tax refundable 1,294 23,763 37, ACCRUED FINANCIAL INCOME Profit receivable on: Bank deposits INVESTMENT AVAILABLE FOR SALE Unquoted National Investment Trust Limited 232,504 (2012: Nil) Units of Rs. 10/- each 10,000 Loss on remeasurement (140) 9,860 33

36 Notes to the Financial Statements Note CASH AND BANK BALANCES Cash in hand 23,599 11,024 Cheques in hand 33,226 28,632 Cash at banks Current accounts ,655 27,042 PLS sharing accounts ,121 42, , , This includes two bank accounts restricted for dividend payments only aggregating to Rs. (thousand) 213 (2012: Rs. (thousand) 240) The balances in PLS sharing accounts bear mark-up, which ranges between 6% to 7% (2012: 5% to 7%) per annum. 18 SHARE CAPITAL Authorised share capital Number of Shares ,000,000 10,000,000 Ordinary shares of Rs. 10/- each 100, ,000 Issued, subscribed and paid-up share capital Number of Shares Ordinary shares of Rs. 10/- each 237, ,500 Fully paid in cash 2,375 2,375 6,362,500 5,762,500 Issued as fully paid bonus shares 63,625 57,625 6,600,000 6,000,000 66,000 60,000 Note RESERVES Capital Merger Reserve ,000 5,000 Revenue General Reserve At the beginning of the year 820, ,000 Transferred from unappropriated profit 130, , , ,000 Unrealized loss on remeasurement of investments- available for sale At the beginning of the year (1,628) (1,707) Change during the year (1,371) (1,628) 953, , This reserve can be utilized by the Company, only for the purposes specified in section 83(2) of the Companies Ordinance,

37 Notes to the Financial Statements Annual Report DEFERRED TAXATION This comprises: Deferred tax liabilities on taxable temporary differences Note Accelerated tax depreciation 62,076 55,814 Trade deposits and short term prepayments 5,191 4,730 Investment available for sale 159 Liabilities against assets subject to finance lease 11,459 Deferred tax assets on deductible temporary differences 67,426 72,003 Provision for doubtful debts (1,848) (484) Provision for employee s compensated absences (6,641) (6,481) Provision for bonuses to staff (8,545) (8,356) 21 TRADE AND OTHER PAYABLES (17,034) (15,321) 50,392 56,682 Due to related parties , ,034 Creditors 265, ,272 Deposits ,384 31,128 Distributors credit balances 52,505 32,288 Accrued expenses 99,046 79,587 Sales tax payable 78,789 41,040 Payable to provident fund 1, Workers Profit Participation Fund ,122 17,004 Workers Welfare Fund ,433 11,535 Unclaimed dividend 1, Taxes and other payables Other liabilities ,421 1, The amounts due to related parties are in the normal course of business and comprises of: 603, ,119 Nawazabad Farms 8,640 Shezan Services (Private) Limited 32,927 50,609 Shahtaj Sugar Mills Limited 40,785 32, , Agreements with the distributors give the Company the right to utilize these deposits in the normal course of business. 35

38 Notes to the Financial Statements 21.3 Workers Profit Participation Fund Balance at the beginning of the year 17,004 11,306 Allocation for the year 21,122 17,004 38,126 28,310 Interest on funds utilized in the Company s business ,440 28,649 Amount paid to the Fund s Trust 17,318 11,645 Balance at the end of the year 21,122 17, Workers Welfare Fund Balance at the beginning of the year 11,535 34,035 Allocation for the year 7,000 5,000 18,535 39,035 Amount paid with annual return 5,102 27,500 13,433 11, This includes Rs. (thousand) 800 (2012: Rs. (thousand) 800) payable to Chief Executive and Rs. (thousand) 1,213 (2012: Rs. (thousand) 433) to various executives. 22 SHORT TERM BORROWINGS - SECURED The aggregate running finance facilities available from commercial banks under the mark-up arrangement are Rs. (thousand) 975,000 (2012: Rs. (thousand) 825,000). The rate of mark-up ranges between 1 month KIBOR+0.50% to 3 months KIBOR+0.50% (2012: 1 month KIBOR % to 1 month KIBOR %), payable quarterly. The facilities are secured against first registered joint pari passu hypothecation and ranking charge on current assets of the Company up to Rs. (thousand) 1,215,000 (2012: Rs. (thousand) 1,215,000) and Rs. (thousand) 200 (2012:Rs. (thousand) Nil) respectively. The un-utilized facility for opening letters of credit and for guarantees as at 30 June 2013 amounts to Rs. (thousand) 137,245 (2012: Rs. (thousand) 143,792) and Rs. (thousand) 50,621 (2012: Rs. (thousand) 47,724), respectively. 23 CONTINGENCIES AND COMMITMENTS Contingencies i) Claim of Punjab Employees Social Security Institution (P.E.S.S.I.) for Rs. (thousand) 2,379 (2012: Rs. (thousand) 2,379) is not acknowledged as debt by the Company as the management is confident that the matter would be settled in its favour, consequently no provision has been made in these financial statements in respect of the same. ii) Notices for additional payments of sales tax and excise duty amounting to Rs. (thousand) 13,094 (2012: Rs. (thousand) 13,094) contested with the Collectorate of Customs, Sales Tax and Central Excise. The management is confident that the matter would be settled in its favour, consequently no provision has been made in these financial statements in respect of the above. 36

39 Notes to the Financial Statements Annual Report 2013 iii) iv) Notices for additional payment of leasehold land amounting to Rs. (thousand) 844 (2012: Rs. (thousand) 844) contested with Sarhad Development Authority. The management is confident that the matter would be settled in its favour, consequently no provision has been made in these financial statements in respect of the above. Based on the tax audit for the tax year 2009 an additional amount of Rs. (thousand) 21,314 was demanded by the Income Tax Department against which the Company filed an appeal before the Commissioner Inland Revenue (Appeals) which was subsequently decided in favor of the Company. The Income Tax Department has filed an appeal before the Appellate Tribunal Inland Revenue against the decision of Commissioner of Inland Revenue (Appeals) for an additional amount of Rs. (thousand) 21,314 in respect of the tax year 2009, which is pending adjudication. However, no provision has been made in the financial statements as the management of the Company is confident of a favorable outcome of the decision. v) The Company filed an appeal before the Commissioner of Inland Revenue (Appeals) against the amended order passed under section 122(5A) of Income Tax Ordinance, 2001 by the Additional Commissioner Inland Revenue for an additional amount of Rs. (thousand) 28,776 in respect of the tax year 2011 this was decided by Commissioner of Inland Revenue (Appeals) however appeal is pending before Appellate Tribunal Inland Revenue. However, no provision has been made in the financial statements as the management of the Company is confident of a favorable outcome of the decision. vi) vii) The Company has filed an appeal before the Commissioner of Inland Revenue (Appeals) against the amended order passed under section 161 of the Income Tax Ordinance, 2001 by the Additional Commissioner Inland Revenue for payment of additional amount Rs. (thousand) 7,900 in respect of the tax year 2011, this was decided by Commissioner of Inland Revenue (Appeals) however appeal is pending before Appellate Tribunal Inland Revenue. However, no provision has been made in the financial statements as the management of the Company is confident of a favorable outcome of the decision. The Company has filed an appeal before the Appellate Tribunal Inland Revenue against the decision of Commissioner of Inland Revenue (Appeals) for an additional amount of Rs. (thousand) 3,465 (2012: Rs. (thousand) 3,465) in respect of the tax year 2003, which is pending adjudication. However, no provision has been made in the financial statements as the management of the Company is confident for a favorable outcome of the decision. Commitments i) Commitments in respect of letters of credit opened for the import of raw and packing materials amounted to Rs. (thousand) 17,755 (2012: Rs. (thousand) 11,208). ii) iii) Counter guarantees in favour of banks in the ordinary course of business amounted to Rs. (thousand) 24,379 (2012: Rs. (thousand) 27,275). The Company had entered into ijarah arrangements for plant and machinery with various Modaraba companies. These arrangements were settled prematurely in current year. 37

40 Notes to the Financial Statements The total of future ujrah payments under ijarah, for each of the following years: Not later than one year 56,383 Later than one year but not later than five years 95, ,150 (iv) Commitments in respect of purchase of land at Sundar Industrial Estate, amounted to Rs. (thousand) Nil (2012: Rs. (thousand) 35,500). Note SALES - NET Domestic 6,286,303 5,895,269 Export 570, ,013 Export rebate 1,090 6,857,470 6,162,282 Less: Discounts and incentives 185, ,546 Sales tax 997, ,074 Federal excise duty ,182,970 1,101, ,674,500 5,060, This includes sales relating to trading activities amounting to Rs. (thousand) 10,849 (2012: Rs. (thousand) 15,990). Note COST OF SALES Manufacturing ,956,160 3,591,791 Trading ,714 11,494 3,963,874 3,603,285 38

41 Notes to the Financial Statements Annual Report Cost of sales - Manufacturing Note Pulps, concentrates etc. - Opening stock 458, ,964 Add: Production/processing during the year 439, ,090 Purchases during the year 190, ,052 1,088,793 1,074,106 Less: Pulps, concentrates etc. - Closing stock 364, ,741 Pulps, concentrates etc. consumed 724, ,365 Raw materials - Opening stock 115, ,996 Add: Purchases during the year 1,416,744 1,389,768 1,532,663 1,540,764 Less: Production of pulps, concentrates 439, ,090 Raw materials - Closing stock 124, ,919 Raw materials consumed 968,161 1,005,755 Packing materials - Opening stock 313, ,201 Add: Purchases during the year 1,817,331 1,639,848 2,130,979 1,928,049 Less: Cost transferred to expenses 14,209 9,596 Packing materials - Closing stock 338, ,648 Packing materials consumed 1,777,809 1,604,805 Factory expenses - Salaries, wages and amenities 143, ,974 Company s contribution to provident fund Stores and spares consumed 167, ,360 Travelling and conveyance 2,306 1,797 Repairs and maintenance 63,156 55,505 Insurance 1,997 1,384 Fuel and power 110, ,107 Inward freight and loading/unloading 4,539 2,599 Utilities 5,214 4,041 Impairment of empty bottles ,415 26,627 Ijara rentals 48,443 17,712 General expenses 12,951 5,776 Depreciation ,804 34, , ,154 Cost of production 4,129,627 3,780,079 Add: Finished goods - Opening stock 154, ,412 4,284,359 3,925,491 Less: Cost of samples , ,800 Cost of wastage and spoilage 28 42,383 45,168 Finished goods - Closing stock 139, , , ,700 3,956,160 3,591,791 39

42 Notes to the Financial Statements 25.2 Cost of sales - Trading 26 DISTRIBUTION COST Note Finished goods - Opening stock 3,767 9,612 Add: Purchases during the year 12,944 10,144 16,711 19,756 Less: Cost of samples Cost of wastage and spoilage 28 1,573 3,559 Finished goods - Closing stock 7,087 3,767 8,997 8,262 7,714 11,494 Salaries, wages and amenities 151, ,760 Company s contribution to provident fund 1, Postage and telephone 2,694 3,267 Travelling and conveyance 28,188 26,234 Repairs and maintenance 41,157 36,073 Insurance 4,774 4,841 Utilities 5,747 5,336 Stationery and printing 1,500 1,325 Rent, rates and taxes 17,979 7,549 Advertising and promotions , ,448 Outward freight and distribution 150, ,811 Staff sales incentive 9,550 9,748 Petrol, oil and lubricants 111, ,619 General expenses 8,233 2,922 Depreciation ,980 14,940 Deterioration on shells and pallets 13, This includes cost of samples amounting to Rs. (thousand) 146,361 (2012: Rs. (thousand) 134,736). 27 ADMINISTRATIVE EXPENSES 1,005, ,287 Note Salaries, wages and amenities 109,716 95,187 Company s contribution to provident fund 1,500 1,740 Postage and telephone 1,360 1,925 Travelling and conveyance 2,219 3,848 Repairs and maintenance 5,282 6,999 Insurance 7,672 6,882 Utilities 4,293 3,607 Stationery and printing 4,438 4,041 Rent, rates and taxes 6,216 5,538 Auditors remuneration ,212 1,950 Legal and professional Donations General expenses 7,083 5,401 Depreciation 6.3 9,074 7, , ,075 40

43 Notes to the Financial Statements Annual Report Auditors remuneration Note Audit fee 1,000 1,000 Tax consultancy services 1, Miscellaneous certification and limited review charges etc Out of pocket expenses Donations None of the directors or their spouses had any interest in any of the donees. 28 OTHER OPERATING EXPENSES 3,212 1,950 Product spoilage 48,760 51,729 Depreciation 6.3 6,149 Barrel deterioration 3,883 Royalty to related party - Shezan Services (Private) Limited 56,521 50,609 Workers Profit Participation Fund ,122 17,004 Workers Welfare Fund ,000 5,000 Loss on impairment of investment in associate Provision against advances given to supplier , OTHER OPERATING INCOME 139, ,720 Income from financial assets Profit on bank deposits 3,564 2,900 Dividend income Foreign exchange gain 3,547 3,465 Income from non financial assets Gain on disposal of property, plant and equipment ,993 Sale of scrap 29,314 26, Gain on disposal of property, plant and equipment 37,257 37,675 Book Sale Gain / Description Cost Value Proceeds (loss) Purchaser Mode Honda Civic 1, Mr. Saifi Chaudhry Employee Company Policy Suzuki Mehran Mr. Akram Tahir Employee Company Policy Suzuki Mehran Mr. Tanveer Hussain Employee Company Policy Suzuki Mehran Mr. Habib Ullah Employee Company Policy Honda Civic 1, Mr. Rehman Sarwar Employee Company Policy Honda Civic 1, Mr. Maqbool Ejaz Employee Company Policy Toyota Corolla 1, Mr. Tariq Dher Employee Company Policy Toyota Corolla 1, Mr. Imran Akram Employee Company Policy Toyota Corolla 1, Mrs. Aisha Asif Employee Company Policy Sachet Packing Machine (7) M/s. Toshiba Engineering Negotiation Visi Coolers 2, (399) Written Off N/A 11,280 2,326 3,

44 Notes to the Financial Statements Note FINANCE COST Interest, mark-up and charges on - Secured short term borrowings 41,721 46,173 Workers Profit Participation Fund Finance lease charges 619 4,244 42,654 50,756 Bank charges 3,102 2,362 45,756 53, TAXATION Current for the year 151, ,865 Deferred for the year (7,909) (1,165) prior year 1, , , Relationship between income tax expense and accounting profit Profit before taxation 394, ,070 Current Taxation: Tax at the applicable rate of 35% (2012: 35%) 138, ,325 Tax effect of expenses that are not deductible in determining taxable income charged to profit and loss account 96,179 54,103 Tax effect of expenses that are deductible in determining taxable income not charged to profit and loss account (46,380) (36,070) Tax effect of applicability of lower tax rate on export sales and dividend income (42,811) (18,658) 145, ,700 Tax charge for the current year 145, , EARNINGS PER SHARE - BASIC AND DILUTED Profit after taxation attributable to ordinary shareholders 249, ,370 Restated Weighted average number of ordinary shares at the end of the year (in thousand) 6,600 6,600 Earnings per share - Basic (Rupees) No fully diluted earnings per share has been disclosed as the Company has not issued an instrument which would have an impact on earnings per share, when exercised. 42

45 Notes to the Financial Statements Annual Report CAPACITY AND PRODUCTION Normal Annual Capacity Actual Production Juices: Bottling plant 5,925,000 Crates 5,824,677 5,024,778 Tetra Pak plant 22,487,500 Dozens 24,902,342 21,530,265 Squashes and syrups plant 590,000 Dozens 283, ,032 Jams and ketchup plant 723,333 Dozens 338, ,719 Pickles plant 306,250 Dozens 242, ,801 Canning plant 210,000 Dozens 113, ,882 The normal annual capacity, as shown above, has been worked out on the basis of 350 working days (2012: 350 working days) except for bottling plant and squashes and syrups plant, which have been worked out on 150 days because of the seasonal nature of the business of the Company. The variance between normal capacity and actual production is because of change in demand and supply condition. 34 REMUNERATION OF CHIEF EXECUTIVE, PAID DIRECTORS AND EXECUTIVES Chief Executive Directors Executives Total number Basic salary 2,640 2,400 2,628 2,388 9,070 9,736 Provident fund contribution Allowances and benefits: Conveyance 7 House rent ,000 2,377 Dearness ,880 2,622 Special Utilities ,080 1,122 Medical Bonus ,456 1,590 Leave encashment 223 Ex-gratia ,889 4,437 5,046 4,597 20,363 20, Fees paid to seven non-executive directors during the year for attending Board meetings Rs. (thousand) 320 (2012: Rs. (thousand) 200) Fees paid to three non-executive directors during the year for attending Audit Committee meetings Rs. (thousand) 155 (2012: Rs. (thousand) 120) Fees paid to three non-executive directors during the year for attending Human Resource Committee meetings Rs. (thousand) 75 (2012: Rs. (thousand) Nil) The Company also provides the Chief Executive, certain directors and executives with Company maintained vehicles, partly for personal and partly for business purposes. 43

46 Notes to the Financial Statements 35 TRANSACTIONS WITH RELATED PARTIES The related parties and associated undertakings comprise related group companies, associates, staff provident fund, directors and key management personnel. Transactions with related parties and associated undertakings, other than remuneration and benefits to key management personnel under the terms of their employment are as follows: Shahtaj Shahtaj Shahnawaz Shezan Nawazabad Shezan Shahnawaz Information Staff Total Sugar Textile Engineering Services Farms Ampis (Private) Systems Provident Mills Mills (Private) (Private) Restaurant Limited Associates Fund Limited Limited Limited Limited Limited Purchases of raw materials 537,931 2, ,569 Sales of finished goods ,059 Royalty charged 56,521 56,521 Purchases/repairs of electric equipments/vehicles Services rendered 2,229 2,229 Contributions to staff provident fund 3,591 3, Shahtaj Shahtaj Shahnawaz Shezan Nawazabad Shezan Shahnawaz Information Staff Total Sugar Textile Engineering Services Farms Ampis (Private) Systems Provident Mills Mills (Private) (Private) Restaurant Limited Associates Fund Limited Limited Limited Limited Limited Purchases of raw materials 557,658 16, ,984 Sales of finished goods Royalty charged 50,609 50,609 Purchases/repairs of electric equipments/vehicles Services rendered Contributions to staff provident fund 3,616 3,616 44

47 Notes to the Financial Statements Annual Report PROVIDENT FUND TRUST The Company has maintained an employee provident fund trust and investments out of provident fund has been made in accordance with provisions of section 227 of the companies Ordinance 1984, and the rules formulated for this purpose. The salient information of the fund is as follow: Note Size of the fund 132, ,664 Percentage of the investments made 94% 97% Fair Value of Investments , ,215 Cost of Investments made 124, ,537 Break-up of the investments in terms of amount and percentage of the size of the provident fund are as follows: Investment Investment Investment as a % of size Investment as a % of size of the fund of the fund 36.1 Breakup of investment Government Securities 84,730 64% 79,937 59% Listed securities and mutual fund units 39,841 30% 52,278 38% 36.2 Investments out of provident fund have been made in accordance with the provisions of the section 227 of the Companies Ordinance, 1984 and the rules formulated for this purpose The information for the financial year 2013 is based on un-audited financial statements of the provident fund. No. of Persons NUMBER OF EMPLOYEES Number of permanent persons employed are as follows: Total Employees Average Employees FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES The main risks arising from the Company s financial instruments are credit risk, liquidity risk, foreign currency risk, interest rate risk and equity price risk. The management reviews and agrees policies for managing each of these risks which are summarised below Credit Risk Credit risk is the risk which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties and continually assessing the creditworthiness of counterparties. The Company does not believe it is exposed to major concentration of credit risk, however to manage any possible exposure the Company applies approved credit limits to its customers. The management monitors and limits Company s exposure to credit risk through monitoring of client s credit exposure review and conservative estimates of provisions for doubtful receivables. The Company is exposed to credit risk on long-term deposits, trade debts, advances, deposits, other receivables and bank balances. The Company seeks to minimize the credit risk exposure through having exposures only to customers considered credit worthy and obtaining securities where applicable. The maximum exposure to credit risk at the reporting date is: 45

48 Notes to the Financial Statements Carrying Values Long-term deposits 3,208 3,194 Trade debts unsecured 248, ,299 Loans and advances 3,093 3,419 Trade deposits 7,057 22,000 Bank balances 126,002 98,145 Accrued financial income The credit quality of financial assets can be assessed by reference to external credit ratings or the historical information about counter party defaults as shown below: Trade Debt 2013 Related parties Other Total Neither past due nor impaired 121, ,599 Past due but not impaired days 34 41,515 41, days 26,973 26, & Above 58,874 58, , , Related parties Other Total Neither past due nor impaired 81,150 81,150 Past due but not impaired days 6 84,882 84, days 62,583 62, & Above 14,678 14, , , Geographically Pakistan 203, ,590 North America 1,735 Europe 14,679 11,911 Central Asia 175 South Asia Africa 30,588 3, , ,299 As at 30 June 2013, trade debts of Rs. (thousand) 1,350 (2012: Rs. (thousand) 1,350 ) were impaired and provided for. 46

49 Notes to the Financial Statements Annual Report Cash at Bank A-1+ 19,310 28,524 A A1+ 26,293 19,279 A-1+ 36,941 12,169 A1+ 3 2,066 A-1+ 9,848 7,303 Cheques in hand 33,226 28, Liquidity Risk 126,001 98,145 Liquidity risk is the risk that the Company will not be able to meet its commitments associated with financial liabilities when they fall due. Liquidity requirements are monitored regularly and management ensures that sufficient liquid funds are available to meet any commitments as they arise. Financial liabilities are analysed below, with regard to their remaining contractual maturities Maturity Upto Maturity After One Year One Year Total Liabilities against assets subject to finance lease Short term borrowings 154, ,948 Trade and other payables 438, ,005 Mark up accrued on short term borrowings 5,988 5,988 Total Financial liabilities 598, , Maturity Upto Maturity After One Year One Year Total Liabilities against assets subject to finance lease 14,463 14,463 Short term borrowings 296, ,656 Trade and other payables 461, ,893 Mark up accrued on short term borrowings 9,220 9,220 Total Financial liabilities 782, , Market Risk Currency Risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company s exposure to the risk of changes in foreign exchange rates relates primarily to the export of its products and import of some chemicals. The Company does not view hedging as financially viable considering the materiality of transactions. 47

50 Notes to the Financial Statements Sensitivity analysis With all other variables remain constant, a 1 % change in the rupee dollar parity existed at 30 June 2013 would have affect the profit and loss account and liabilities and equity by Rs. (thousands) 499 (2012: Rs. (thousands) 177) Interest Rate Risk Interest rate risk arises from the possibility that changes in interest rate will affect the value of financial instruments. The Company is exposed to interest rate risk for short term borrowings obtained from the financial institutions, liabilities against assets subject to finance lease and bank deposits, which have been disclosed in the relevant note to the financial statements. Sensitivity analysis If interest rates at the year end, fluctuate by 100 basis points higher/ lower, profit for the year would have been Rs. (thousand) 1,549 (2012: Rs. (thousand) 508) higher/ lower. This analysis is prepared assuming that all other variables held constant and the amounts of liabilities outstanding at the balance sheet dates were outstanding for the whole year Capital Management The primary objective of the Company s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders value. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions. Capital includes ordinary share capital and reserves. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue of new shares. Consistent with industry norms, the Company monitors its capital on the basis of gearing ratio. The ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings as shown in the balance sheet less cash and cash equivalent. Total capital is calculated as equity as shown in the balance sheet plus net debt (as defined above). The Company finances its operations through equity, short term borrowing and managing working capital. The Company has no gearing risk in current year that is to be managed as it does not have any long term borrowing. The Company is not subject to any externally imposed capital requirements Fair value of financial instruments The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair value. Fair value is determined on the basis of objective evidence at each reporting date. 48

51 Notes to the Financial Statements Annual Report SEGMENTAL ANALYSIS The Company s activities are broadly categorized into two primary business segments namely Juice Drinks activities and Other Operating activities. Juice drinks activities Juice drinks activities include bottled as well as juices in tetra pak packings. Other operating activities Other operating activities include pickles, ketchup, sauces, jams etc. Segment analysis of profit and loss account : Juices and Drinks Others Total Sales 4,718, ,419 5,674,500 Cost of sales (3,239,089) (724,785) (3,963,874) Profit before taxation 1,478, ,634 1,710,626 Unallocated expenses Corporate expenses (1,168,082) Finance costs (45,756) Other operating expenses (139,724) Other operating income 37,257 Share of profit from an associate Taxation (145,000) Profit after taxation 249,321 Segment analysis of assets and liabilities as at 30 June 2013: Juices and Drinks Others Total Segment assets 1,615, ,070 2,014,453 Unallocated assets 263,175 Total 2,277,628 Segment liabilities 273,369 95, ,987 Unallocated liabilities 597,603 Total 966,590 49

52 Notes to the Financial Statements Segment analysis of profit and loss account for the year ended 30 June 2012: Juices and Drinks Others Total Sales 4,105, ,207 5,060,898 Cost of sales (2,907,996) (695,289) (3,603,285) Profit before taxation 1,197, ,918 1,457,613 Unallocated expenses Corporate expenses (991,362) Finance costs (53,118) Other operating expenses (132,720) Other operating income 37,675 Share of profit from an associate (18) Taxation (110,700) Profit after taxation 207,370 Segment analysis of assets and liabilities as at 30 June 2012: Juices and Drinks Others Total Segment assets 1,329, ,988 1,903,935 Unallocated assets 291,507 Total 2,195,442 Segment liabilities 238,503 49, ,139 Unallocated liabilities 791,843 Total 1,079, DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue by the Board of Directors on 25 September EVENTS AFTER THE BALANCE SHEET DATE The Board of Directors have proposed a final dividend of Rs.10/- per share, amounting to Rs. (thousand) 66,000 for the year ended 30 June 2013 (2012: Rs. 9/- per share amounting to Rs. (thousand) 54,000) and 10% bonus share amounting to Rs. (thousand) 6,600 (2012: 10% bonus shares amounting to Rs. (thousand) 6,000) along with transfer to general reserve amounting to Rs. (thousand) 150,000 (2012: Rs. (thousand) 130,000) at their meeting held on 25 September 2013 for approval of the members at the Annual General Meeting to be held on 29 October Muneer Nawaz Chairman Muhammad Khalid Chief Executive 50

53 Form of Proxy I/We, of being a Member(s) of Shezan International Limited holding ordinary shares hereby appoint of or failing him of who is also a Member of Shezan International Limited as my/our Proxy in my/our absence to attend and vote for me/ us and on my/our behalf at the 50 th Annual General Meeting of the Company to be held on 29 October 2013 and at any adjournment thereof. As witness my/our hand/seal this day of Signed by in the presence of Folio Number Signature Affix Rs. 5/- revenue stamp This signature should agree with the specimen registered with the Company. Important: 1. No person shall act as proxy unless he himself is Member of the Company, except that a corporation may appoint a person who is not a Member. 2. If a Member appoints more than one proxy and more than one instruments of proxy are deposited by a Member with the Company, all such instruments of proxy shall be rendered invalid.

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